The tokenised money market fund market surpassed $10 billion in 2025, growing approximately 85% annually. BlackRock's BUIDL fund, Franklin Templeton's OnChain US Government Money Fund, and a growing number of institutional offerings are converting traditionally illiquid fund structures into programmable, near-instant-settlement instruments. For platforms holding significant client fund balances in safeguarding, this shift creates a strategic question: should idle capital be earning yield, and if so, who decides?
The question is not whether yield on safeguarded funds is possible. It is whether the infrastructure supports it while maintaining compliance, liquidity, and the platform's control over deployment decisions. The custodian should enable the option. The platform should make the choice.
The opportunity in idle safeguarded capital
Payment platforms, EMIs, and EOR providers routinely hold substantial client fund balances in safeguarding accounts. These balances exist because of the timing gap between when funds are received and when they are disbursed: employer funding received on Monday, employee salaries paid on Friday. Platform deposits received today, merchant payouts settled next week.
Under traditional safeguarding arrangements, these funds sit in bank accounts earning minimal or no interest. The safeguarding requirement, understandably, prioritises protection over return. Funds must be available for immediate redemption. They must be held in approved instruments. They cannot be lent or deployed for balance sheet purposes.
Tokenised money market funds change the calculus without changing the constraint. These instruments invest in short-duration US Treasuries, cash, and repurchase agreements. BlackRock has explicitly restructured its Select Treasury Based Liquidity Fund to align with GENIUS Act reserve requirements, positioning it as a reserve asset for payment stablecoin issuers. The same asset composition that satisfies stablecoin reserve rules also qualifies under traditional safeguarding frameworks. Tokenised MMFs offer near-instant redemption through blockchain-based settlement, and because they are tokenised, they can be integrated into existing treasury workflows through API.
The BCG's analysis of asset tokenisation projected that the tokenised asset market could reach $16 trillion by 2030, with money market funds and fixed-income instruments leading adoption. For platforms, the relevant figure is not the total market size. It is the yield differential between holding funds in a zero-interest safeguarding account and deploying them into a compliant, liquid instrument that earns at or near the risk-free rate.
The compliance question
Yield on safeguarded funds is not straightforward from a regulatory perspective. The FCA's safeguarding regime requires that relevant funds be held in approved safeguarding methods: a segregated bank account, an approved insurance policy, or (in certain circumstances) approved liquid assets. The FCA's approach document specifies the conditions under which non-cash assets may be used for safeguarding.
PSD3 in the EU will allow firms to safeguard directly with central banks where permitted, potentially opening a pathway for alternative safeguarding instruments. MiCA introduces separate provisions for e-money token reserves. The GENIUS Act explicitly permits stablecoin reserves to be held in Treasury securities and other approved assets.
The regulatory landscape is evolving toward allowing yield-bearing instruments in safeguarding, subject to strict conditions on liquidity, quality, and segregation. Platforms that build the infrastructure to support compliant yield deployment now will be positioned to capture the opportunity as these frameworks mature.
The critical distinction is between the custodian deploying client funds for its own benefit and the platform choosing to deploy funds in instruments that the platform selects and controls. The former creates conflicts of interest and regulatory risk. The latter puts the decision where it belongs: with the institution that has a fiduciary obligation to the end customer.
Infrastructure requirements for yield deployment
Earning yield on safeguarded funds requires infrastructure that supports three specific capabilities:
- Multi-asset custody within a single safeguarding framework. The custody architecture must support holding both cash and tokenised instruments side by side. Named custody accounts provide the structural segregation needed to track which client's funds are held in cash and which are deployed in yield-bearing instruments, with clear audit trails for each.
- Redemption speed that meets liquidity obligations. If a platform needs to return safeguarded funds to a client on demand, the yield-bearing instrument must be redeemable within hours, not days. Tokenised money market funds offer this through blockchain-based settlement, but the operational integration between the fund, the custodian, and the platform's treasury systems must be seamless.
- Reporting that captures yield activity within safeguarding frameworks. The FCA's monthly returns and annual audit requirements apply to all safeguarded funds, including any deployed in approved instruments. The cash management infrastructure must provide consolidated visibility across cash holdings and yield-bearing positions.
The platform's decision, not the custodian's
The most important principle in yield on safeguarded funds is control. The platform, not the custodian, should decide whether to deploy idle capital, which instruments to use, what percentage of balances to keep in cash, and when to redeem.
A custodian that deploys client funds into yield-bearing instruments without the platform's explicit direction creates regulatory and fiduciary risk. A custodian that provides the infrastructure for the platform to make those decisions, with appropriate compliance guardrails, creates strategic value.
This distinction maps directly to the difference between a traditional correspondent bank and a specialist clearing institution. A correspondent bank may use client deposits for its own lending activity, earning yield on the bank's balance sheet rather than the platform's. A specialist correspondent holds funds in multi-currency clearing accounts without lending, preserving the platform's ability to choose whether and how to earn yield on safeguarded balances.
Lorum provides custody and cash management infrastructure that supports both traditional safeguarding and yield-bearing deployment, with the platform maintaining full control over deployment decisions. As tokenised instruments mature and regulatory frameworks adapt, the infrastructure to support compliant yield deployment will become a standard capability rather than a differentiator. Platforms that build for it now will be positioned to act when the frameworks are finalised.
